Journal Entries and QuickBooks Job Costing
This Article Will Focus On one of the root causes for inaccuracies in QuickBooks Job Costing Reports which leads far too many Plumbing and Mechanical Contractors to chase the wrong jobs, in the wrong market niches and keeps them running on the “work-till-you-drop-dead-treadmill”.
Lately more Plumbing and Mechanical Contractors are beginning to question why are they on that horrid treadmill and asking themselves questions like “Is there a better way? Yes there is and accurate Job Costing is one of the pieces of the foundation on which to build your successful Contracting Company.
Job Costing In Simple Terms can show you where your Plumbing and Mechanical Contracting Company is making money and losing money. Once you know where the most cash flow and profits are would it make sense to pursue more of those opportunities and discard the rest? 80/20 Rule. But if the reports are inaccurate it can destroy your company much like the proverbial rhyme:
For Want of a Nail
For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.
One Root Cause For Inaccuracy in QuickBooks Job Costing Reports we see is when a bookkeeper has too much experience and not enough continuing education and fresh training. We hear it almost daily from bookkeepers “I know all about QuickBooks because I’ve been using it for ten years”.
The Fact That The Bookkeeper has been working with QuickBooks for ten years is only part of the truth. The rest of the truth is most of them learned enough in their first six months to be good enough to B.S. everyone else in the contractors office. “The One Eyed Man Is King On The Island Of The Blind” – Actual author unknown.
They Never Dived Deep into learning and studying basic bookkeeping or regular accounting, let alone construction accounting which means they have six months experience repeated twenty times. “The Greatest Enemy of Knowledge Is Not Ignorance, It Is The Illusion of Knowledge” – Actual author unknown
Journal Entries Are Easy For The Bookkeeper And Bad For The Contractor
Journal Entries are fast and stupid way to enter an entire bank or credit card statement into QuickBooks in a fraction of the time it takes to enter each individual transaction. In the short run they save time and effort and you, the Plumbing and Mechanical Contractor pays for it with bad Job Costing Reports.
Five Things To Watch For That Could Be Killing Job Cost Reports
- Are there more than three Journal Entries a month?
- Are credit card charges and payments being recorded with Journal Entries?
- Are supplier and vendor bills and payments being recorded with Journal Entries?
- Do the Job Costing Reports have a “No Item” line with amounts shown?
- Are the Job Cost and Job Profitability Reports vastly different from the Profit And Loss Reports?
We Have A Contractors Bookkeeping System – And checklists for everything and including a Quarterly Review Checklist to make certain all transactions are properly coded based upon the electronic and paper documents our clients provide us.
If Your Intention Is – To someday sell your business and retire excessive Journal Entries will not help you get the best possible price because there are a number of financial ratio’s that will not calculate using Journal Entries.
From An Accounting – Point of view there is nothing wrong with Journal Entries and many companies operate with a set of Journals, Ledgers and Sub-Ledgers and they generate financial reports and file taxes with no problems at all.
From A Project Management – And business planning perspective the opposite is true because accounting looks backward into historical records to determine what happened and why. Project Management, Business Planning and Forecasting looks forward and bases projections on accounting records in the form of financial ratios, job Costing and uses S.W.O.T. Analysis to determine the best place to focus your company’s limited resources in order to optimize profits.
Thinking About Outsourcing Your Contractors Bookkeeping Services?
We Are QuickBooks Experts Specializing In Construction Bookkeeping Services
About The Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington, www.FastEasyAccounting.Com He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Plumbing Contractor, General Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, QuickBooks For Contractors Expert and Xero Accounting Specialist, Bill.Com Guru and Tsheets ProAdvisor. Follow Randal on Google+
I leave you with this heartfelt blessing – “May you be blessed with long life, many good friends, lots of challenges to overcome, opportunities to seize and ever increasing strength of character and ever deepening faith so that you may continue to be a source of inspiration for those who depend upon you. Always know that you are touching the lives of people you will not meet until after your journey ends.”
Randal L. DeHart, PMP, QPA